Sources say BP near $14B deal to settle Gulf oil spill claims
BP PLC and lawyers for businesses and individuals suing over the 2010 Gulf of Mexico oil spill are near a $14-billion accord to be funded with money set aside for out-of-court settlements, according to three people familiar with the talks.
BP would close its $20-billion Gulf Coast Claims Facility and shift the remaining $14 billion to plaintiffs hurt by the disaster, the largest offshore spill in U.S. history, the people said. Such a deal wouldn’t include fines by the federal government that could reach $17.6 billion, lawsuits by state governments or claims between BP and partner companies involved in the disaster. BP shares rose almost two per cent on news of the potential deal to their highest point in more than a year.
The April 2010 Macondo well blowout destroyed the Deepwater Horizon rig, killed 11 workers and sent more than four million barrels of oil spewing into the gulf over three months. It spawned hundreds of suits against BP, Vernier, Switzerlandbased Transocean Ltd., owner and operator of the doomed rig, and Houston-based Halliburton Co., provider of cementing services at the site.
“They could be about 90 or 95 per cent done and now they have to go that last yard, which is always the toughest,” Carl Tobias, who teaches mass-tort law at the University of Richmond in Virginia, said of the proposed accord. “There could be an awful lot of money that is still in play or provisions that are hard to swallow for one side or the other.”
The discussions between the plaintiffs and BP are nearing completion, said the people, who declined to be identified because they weren’t authorized to speak publicly.
The progress allowed BP to persuade a federal judge in New Orleans to delay by a week a multibilliondollar liability trial over the spill that was set to begin this week. They asked for extra time to allow talks to continue, the company and plaintiffs said in a joint statement. They didn’t make reference to the $14-billion proposal.
David Falkenstein, a spokesman for the lead plaintiffs’ lawyers in the case, didn’t return calls seeking comment. Ellen Moskowitz, a spokeswoman for BP, declined to comment on the proposed accord beyond the earlier statement on the delay.
The company has been in settlement talks for months with the federal government, other companies facing liability for the spill, as well as plaintiffs lawyers, people familiar with the discussions have said.
The proposed $14-billion agreement would be separate from BP’S talks with the government, the people said.
The U.S. Clean Water Act lets the United States seek fines of as much as $1,100 for each barrel of oil spilled as a result of simple negligence, often described as a failure to exercise ordinary care. The maximum increases to $4,300 a barrel for gross negligence, or a conscious act or omission, leaving BP liable for as much as $17.6 billion in fines.
BP set aside $3.5 billion to pay Clean Water Act fines based on its lower estimate of barrels spilled and no finding of gross negligence.
U.S. District Judge Carl Barbier, who would preside over the trial now scheduled to start Monday, would decide whether BP can demand other firms involved in the spill help pick up the tab for the estimated $26 billion in costs spawned by the destruction of the Deepwater Horizon.
If a deal isn’t reached by all sides, the judge must determine whether the companies should pay punitive damages to thousands of business and property owners, and fines to the government for polluting the Gulf of Mexico.
The proposed settlement with the non-governmental plaintiffs would allow lawyers to use the claims fund to set up a system for compensating spill victims based on the type of harm they suffered, the people familiar with the talks said. The system may be similar to those used to decide recoveries in class-action cases, they said.
Brent Coon, a Houston-based lawyer representing spill victims both in federal and state courts, said he worries $14 billion won’t provide enough compensation for those harmed in the disaster.
“I’m concerned that the $14 billion fund isn’t adequate, and I’m concerned that just transferring oversight of the fund to our own group may or may not be enough to solve the problems,” he said.